Top-yielding suburbs revealed

New data has uncovered the locations with the highest yields in one state, but does that make them ‘hotspots’?

Recent figures released by CoreLogic RP Data revealed the top 10 highest-yielding suburbs in Victoria.

Murtoa took the number one position, achieving gross rental yields of 9.35 per cent, with Ouyen (8.86 per cent) coming in at number two and Coleraine (8.84 per cent) in third place.

These were followed by Mortlake (8.67 per cent), Warracknabeal (8.51 per cent), Nhill (8.02 per cent), Dimboola (7.89 per cent) and Red Cliffs (7.55 per cent), all of which are located west and north-west of Melbourne.

Rosedale and Cobram, located east and north-east of Melbourne, took out the ninth and 10th spots for highest-yielding suburbs, recording rental yields of 7.45 and 7.25 per cent respectively.

Speaking to Which Investment Property, Cate Bakos, buyer’s advocate and director of Cate Bakos Property, said that despite recording high rental yields, these outer suburbs of Melbourne are not on her growth prospects list for Victoria.

“They’re all in regional areas that aren’t high-population areas. What’s more, the one thing that the majority of these suburbs have in common is a declining population,” she said.

“If I wanted a yielding property, I’d earmark an area with a stronger population and an area that’s an easier drive into Melbourne. And I’d try for one with at least a growing population.”

According to Ms Bakos, this kind of limited data can be unreliable.

“There are very limited sales in these areas, so we are looking at limited sales data, and the percentage yields that have been calculated here are calculated off a median house price,” she said.

“If there are limited sales in the area, then these figures aren’t necessarily super-reliable.

“For example, in Ouyen a large allotment of land was sold and then in the following week or month another massive allotment was sold. In that case, the median might not necessarily be representative of all of the houses that could be sold over the course of a longer period of time.”

Ms Bakos said that while investors should understand the yields that they require, if they are buying for yields only and not capital growth, they need a much larger number of properties to be able to retire on a property portfolio alone.

“If there’s an option to get a balance of both capital growth and yields, that can deliver a much healthier portfolio for an investor because achieving capital growth along the way will help them continue to springboard into new properties,” she said.

“If you’ve got no growth, you’ve got to continue saving the traditional old-fashioned way to buy subsequent properties. But if you’ve got capital growth, then at least you’ve got equity to rely on to continue to grow your portfolio.”